R&D Tax Credit: Your Guide to Tax Savings

Your business could be missing substantial tax savings. Fewer than one in three eligible companies claim the R&D tax credit, while the federal government sets aside $12 billion each year for innovation support.

The numbers tell a clear story – businesses receive 13 cents back for every qualified research dollar spent. This tax benefit extends well beyond technology companies. Manufacturing firms, agricultural businesses, construction companies, and numerous other industries qualify for these savings.

We help business owners like you secure these valuable tax credits. Our team breaks down the qualification requirements, calculation methods, and claim process into clear, actionable steps. You’ll learn exactly how to turn your research investments into real tax savings.

R&D Tax Credit Essentials

The R&D tax credit offers a dollar-for-dollar reduction in your tax liability when you invest in qualified research activities. We help you understand exactly what qualifies to maximize your tax savings.

Qualifying Your Research Activities

Your research must meet these four key requirements:

• Business Improvement Focus: Your work must enhance products or processes through improved functionality, performance, reliability, or quality
• Scientific Foundation: Research needs to use principles from physical science, engineering, biology, or computer science
• Technical Uncertainty: Your work should tackle uncertainties in capability, methodology, or design
• Testing Process: You must conduct systematic evaluation of alternatives through testing or modeling

Your Qualified Expenses

We look at four main expense categories for R&D tax credit calculations:

• Employee wages for direct research work
• Research supplies and materials
• Contract research costs (65% limit applies)
• Computer rental expenses

Your team needs to maintain detailed records for all research activities and expenses.

2024 IRS Updates

The IRS made key changes to Form 6765 for 2024. Your business must now document components that make up 80% of total qualified expenses, with a 50-component maximum. The IRS removed requirements for researcher identification and research goal documentation. Starting June 18, 2024, you get 45 days to perfect credit claims before final decisions.

R&D Tax Credit Calculations

We provide expert guidance to determine your exact R&D tax credit amount. Our team helps you identify and document every qualified expense to maximize your tax savings.

Your Qualified Research Expenses

Our tax experts focus on four key expense categories:

• Employee wages for direct research work, supervision, and support
• Research supplies and materials, not including property improvements
• 65% of amounts paid to outside research contractors
• Computer rental costs for research activities

Two Ways to Calculate Your Credit

We offer two calculation methods to maximize your tax savings:

Regular Credit Method (RCM)

• Returns 20% of qualified expenses above your base amount
• Works best for businesses with steady R&D investment

Alternative Simplified Credit (ASC)

• Offers 14% of qualified expenses above your three-year average
• Provides 6% credit if you have no previous R&D expenses

Getting the Best Results

Our team calculates your credit using both methods to find the highest savings. We help you maintain proper documentation, including W-2s, payroll records, and time tracking data. Sound record-keeping ensures you capture every qualified dollar spent on research.

Claiming Your R&D Tax Credit

We guide you through every step of the R&D tax credit claim process. Our team ensures proper documentation and timely filing to secure your tax savings.

Required Records

Your R&D credit claim needs sound documentation. We help you maintain:

• Records of qualified employee wages including W-2 forms and payroll data
• Supply expense documentation with purchase orders and invoices
• Contract research records including service agreements and Form 1099-NEC

Filing Your Claim

Form 6765 serves as your primary filing document. The form contains:

• Section A for regular credit claims
• Section B for alternative simplified credit
• Section C listing additional required forms
• Section D for payroll tax elections

For claims after June 18, 2024, you must document all business components and research activities. The IRS offers a 45-day perfection period through January 10, 2026 to address any information gaps identified in Letter 6426C or 6428.

Expert Support

We provide trusted advisor support throughout your claim process. The IRS typically processes claims within six months. Our team ensures your claim meets all requirements while maximizing your tax benefits.

If the IRS selects your claim for review, we handle all documentation requests and protect your interests. We maintain proper records year-round, eliminating the need for retroactive documentation.

R&D Tax Credit Strategies

We help businesses like yours maximize R&D tax credit benefits. Our team delivers proven tax-saving approaches tailored to your business structure and size.

Small Business Benefits

Your small business or startup with less than $5 million in annual gross receipts qualifies for up to $500,000 in payroll tax savings. These credits reduce your employer Social Security and Medicare tax obligations. Your unused credits stay available for 20 years, offering flexibility for growing companies.

State Tax Advantages

We help you combine federal and state tax benefits. 37 states offer R&D tax credits, giving your business:

• Tax credits from 3% to over 20% of qualified expenses
• Full refunds in Arizona and Connecticut
• No expense claim limits
• Immediate deductions in select states

Smart Planning Steps

Our team helps you build strong R&D credit documentation from day one. We connect your finance and technical teams to track qualified activities. Your time tracking systems and project records create solid proof for future claims. We guide your R&D location decisions since U.S.-based research offers better tax treatment.

R&D Tax Credit Value

The R&D tax credit delivers real tax savings to growing businesses. Your company gets back 13 cents for every qualified research dollar spent. Plus, 37 states offer additional tax credits to boost your savings.

Our team guides you through proper documentation and strategic planning. We help you:

• Track qualified expenses from day one
• Maintain detailed activity records
• Choose the best calculation method
• Capture every eligible expense

The 2024 IRS updates bring important changes to R&D credit claims. Your manufacturing, agriculture, construction, or technology business qualifies when meeting the four-part test. Sound documentation and expert guidance ensure successful claims.

R&D tax credits fuel your business growth. Our outsourced CFO services turn your research investments into significant tax advantages. We provide the financial expertise to guide your growing business to success.

Contact Us today to learn more about how our CFO services can help your business achieve success.